Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

Which of the following is the solvency ratio of a company?
A) Current ratio
B) Debt-equity ratio
C) Quick ratio
D) Proprietary ratio
E) Interest coverage ratio
F) Total Assets to Debt Ratio
G) Dividend per share

Options:

ADEF

ACG

BDEF

ABCDE

Correct Answer:

BDEF

Explanation:

Individuals or entities that have provided funds to the business over an extended timeframe are keen on ensuring the reliability of their regular interest payments and the eventual reimbursement of the principal sum at the loan's conclusion. Solvency ratios are devised to gauge the business's capacity to honor its financial obligations over the long term. The subsequent ratios are conventionally calculated to assess the business's solvency:
a) Debt-Equity Ratio
b) Debt to Capital Employed Ratio
c) Proprietary Ratio
d) Total Assets to Debt Ratio
e) Interest Coverage Ratio